In view of interest in the economic prospects in Iraq, this website will provide regular general updates to appraise visitors of the important administrative and economic developments that might effect the international business environment.

1. General situation in Iraq

Since the downfall of the previous Iraqi regime nearly three and a half months ago, the crucial security situation in Iraq remains unsettled with consequently fairly slow progress being achieved in other areas. Difficulties are still being experience in repairing major aspects of life such as electricity supply, water treatment and purification as well as the economically important oil production.

As for legislative progress it is important to note that in accordance with generally accepted rules of international law, local Iraqi laws previously issued will remain in force and applicable until repealed or amended by a new authority or government.   

2. Administration in Iraq

The Coalition Provisional Authority (CPA) appointed the Iraqi Provisional Governing Council (GC) of 25 members which held its first meeting on 13.07.03 The GC is expected to form a larger committee of experts to prepare a draft Constitution which is expected to be subject of a national referendum. Another important task of the GC will be to appoint ministers to administer the day to day affairs of the Government. However, it should be noted that the CPA’s Civil Administrator will have the authority to review the decisions of the GC. 

3. Economy and Finance

Important steps were made towards normalizing the economic and financial situation with the appointment of a Provisional Governor of the Iraqi Central Bank (ICB) and the declaration that the new currency will be in circulation on 15.10.03. This will be an important step to reintegrate the Iraqi economy particularly since there are presently two currencies in circulation with two varying exchange rates in the autonomous Northern provinces and the rest of the country. 

The Governor of the ICB also declared that the ICB will coordinate with competent parties to encourage international investments without being restricted to nationals of Arab countries as was previously provided. The Governor further stated that the liberalization of the economy, encouragement of local and international investments and activating the banking sector will be a priority. Certain laws including the ICB law, presently providing for very strict monetary and foreign exchange controls, the commercial code, company law and other laws should be amended or new more flexible liberal laws issued.      

4. Iraqi Trade

The United Nations decided in Resolution 1483 adopted on 22.05.03, to remove all prohibitions related to trade with Iraq and the provision of financial or economic resources imposed by UN Resolutions.

In addition to above mentioned UN Sanctions, local laws requiring import licenses, the imposition of customs tariffs and providing strict exchange controls were restrictive of trade to and with Iraq. While some of these controls have been formally suspended as will be mentioned below others are simply not being enforced presently and will need to be reviewed in due course.

5. Customs Tariffs

The CPA declared the suspension of customs duties and tariffs that were previously imposed generally as a percentage of the cost of the goods or products imported until the end of 2003. Consequently, a large number of consumer goods were brought to Iraq to benefit from neighboring countries, particularly those with free zones. By the end of the year a new customs law with new tariffs is expected to be issued.

6. Income Tax

The Iraqi Income Tax No. (113) of 1982 as amended and the Regulations issued in accordance therewith provide for the impositions of high tariffs as income tax. Although a formal suspension of the imposition of income tax does not seem to have been issued, the taxation authority does not seem to have reorganized consequently there seems to be a de facto moratorium on the filing of tax returns and the collection of taxes which has to be reviewed and organized in the near future.

The above is not a legal opinion or advice. Contact GLS for further any detailed advice required on specific aspects of developments in Iraq. 

Other Updates:

Iraq Update: October 2003

Iraq Update: Agency Law

Iraq Update: July 2003

Iraq Update on Agency Law: March 2001